• This story was originally published in June 2022
It started as a small-scale solution to provide shelter for homeless who had nowhere else to go.
But emergency housing is now big business, and some motel and motor lodge owners have completely changed their business models to specialise in housing the most vulnerable people in society.
One motel alone has been given $16 million in grants for emergency accommodation, data obtained by the Herald shows.
As a result, budget and mid-range motels and hotels have become attractive products for investors. They have been sold in the last two years on the basis that they have steady income from Ministry of Social Development (MSD) tenants.
But at what cost? One housing advocate said the industry had grown at the expense of more secure, long-term housing. There are also concerns about what will happen when motels revert to taking tourists again.
The Government began funding emergency housing in 2016 after a review of the sector, beginning with a handful of motels. Information obtained under the Official Information Act shows the scale of the sector's growth. Since 2016, 2500 motels have housed MSD tenants at a total cost of $881m.
A series of events in 2020 created an opportunity for motel owners. There was growing demand for urgent housing as the pandemic hit, the border closure suddenly removed the industry's main source of income, and the Government stopped using private homes for emergency housing. This led to all of the emergency housing funding - up to $1m a day - being channelled into the accommodation sector.
A handful of companies owning multiple properties have swallowed up around 20 per cent of the emergency housing funding. The biggest recipients were motel owners Roger Nolan and Jinhua Ou, whose 13 properties earned $60m in emergency housing grants. One of their properties, the Anglesea Motel in Hamilton, earned $16.2m in grants alone between 2017 and 2022. The two businessmen did not respond to requests for comment.
Patrick McGuire, whose owns five motels, said he had no plans to take on vulnerable tenants but after the border closure he was approached by MSD to take on a couple of people.
"We found that there were people who had a need, and suddenly realised it wasn't just a small need - it became quite large. So we gradually moved into that end of the business."
Two of his motels are now exclusively for emergency housing. He said he charged a higher rate for MSD referrals because they were usually larger families and had higher needs, including space for their belongings.
"Normally in a motel if you have one truck driver staying with you, and now you've got a Winz family which might be a mother and three kids. Your model obviously has to change because the needs and supplies are different."
In all, his business entities have received $16m in funding in the last five years.
"There is a perception out there that motels are rolling in money," McGuire said. "But you've got to remember that we actually provide a lot of units and we provide a very large amount of service. We work extremely hard to provide the services that we do."
Auckland-based entrepreneurs Suresh and Seema Chatly run nine motels in Auckland. Suresh said his switch to emergency housing during the pandemic was not part of a deliberate strategy but a way to stop going broke.
"It was more of a survival to pay the mortgage," he said.
Chatly said he charged the same room rate regardless of whether the rooms were filled by tourists or emergency housing tenants. Now that tourism was resuming, six of their nine properties had reverted to only taking tourists.
This is one of the fears raised by organisations who work with homeless people - that they will be displaced from motels by returning tourists. The Auditor General, in a report released in December, said MSD needed to plan for a time when commercial providers reverted to normal business.
MSD's group general manager of housing Karen Hocking said they were aware of the pressure on motel demand, but had not any indication that large numbers of motels intended to stop offering emergency housing. The sector, along with transitional housing, is currently being reviewed.
The funding and quality of emergency housing has previously come under intense scrutiny.
An investigation by the Auditor General last year found that MSD had paid private landlords above-market rates for emergency housing and failed to monitor the quality of the properties. Private rentals which were getting $1400 a week in income were rented to MSD for $3900 a week.
One of the biggest recipients of emergency housing money, Silverfern Property Services, went into liquidation last year after claiming nearly $15m in emergency housing grants.
It had been criticised by community groups for charging more than $2000 a week for substandard properties. One tenant said their $2800-a-week property was "not fit for a dog to live in".
In June 2020, MSD stopped funding private rentals because the border had closed to visitors and motels and hotels had spare capacity.
The Auditor-General urged the ministry to be more careful and strategic in its funding of emergency housing, while also being more sensitive to the needs of tenants.
Hocking said the cost of emergency housing was set by the supplier, based on the market rate for immediately available motel rooms.
"It's important to note that emergency accommodation isn't our first option – it's a last resort. When someone in housing distress comes to us, we'll look at all the other options they might have to avoid homelessness first."
Monte Cecilia Housing Trust CEO Bernie Smith said it was difficult to stomach the amount of money which had gone towards motels, which were unsuitable for long-term tenancies - especially families.
"If they weren't being used for emergency housing, a number of these motels were due for a bulldozer," he said. "And this money has just rescued them. But it's not actually helping the housing solution.
"The Government says well motels are better than a park or a car. And I do tend to agree but some of these motels are pretty questionable."